Palmisano outlines IBM's $10b on-demand initative

IBM Chief Executive Officer Sam Palmisano spoke Wednesday before a gathering of several hundred top IBM customers and executives, offering a State-of-the-Union-like rundown on IBM's view of the IT industry and vision of its future.

The technology industry moves through eras every 20 years or so, and it's now entering a new one: A wave of integration and "on demand" business capabilities that will allow organizations to respond rapidly to constituent needs and market trends, Palmisano said.

On-demand computing was the theme of his talk, as Palmisano outlined the forces and technological advances driving the new wave, to which IBM is committing US$10 billion in research & development, acquisition and marketing funds. During his talk, which was also webcast to IBM's 350,000 employees worldwide, Palmisano said that he planned to put Irving Wladawsky-Berger, currently vice president, IBM Server Group Technology and Strategy, in charge of a new on-demand computing initiative.

"In my point of view, what you are seeing is a fundamental shift that is a long-term shift, that is irreversible," he said.

As companies began adopting e-business technologies, they first focused on access: Putting information on the Web, enabling some e-commerce, and so on, Palmisano said. Next came the integration phase, as businesses worked for internal integration, adopting ERP (enterprise resource planning) and CRM (customer relationship management) systems and building connections between them.

Now, the next stage, the on-demand transition, is about extending the enterprise beyond its borders, integrating fully with customers, partners and suppliers and using information technology to increase businesses' flexibility and responsiveness, he said.

IBM saved $6.2 billion in costs by adopting integration technologies, but its savings from on-demand technologies will be even bigger, Palmisano said.

He sees open standards and virtualization as major components of on-demand computing, with grid computing and autonomic technologies key to creating infrastructures robust enough to support enterprises' increasing IT complexity.

Grid computing is "operational, it's functional, it's here," Palmisano said, citing a cancer research project IBM is working on in partnership with the University of Pennsylvania. "But there's really another dimension to solving the problem: Become autonomic."

IT systems need to become more like the human body, able to repair, protect and optimize themselves, Palmisano said. IBM's Project eLiza is an umbrella encompassing dozens of IBM software and hardware autonomic initiatives, which are now paying off with new capabilities in products including Tivoli and DB2, he said.

IBM released Wednesday a white paper, titled "Living in an On Demand World," further outlining its position on the issues Palmisano addressed.

"Customers increasingly want products and services on their own terms, specific to their needs -- when, where and how they choose," the paper states.

Palmisano's speech reiterated many of the same themes articulated by Lou Gerstner, who led IBM for a decade before retiring and turning the reigns over to Palmisano earlier this year. Six years ago at another New York speech before executives and partners, Gerstner proclaimed that the IT industry was entering the e-business era. On-demand computing is a further step toward crystallizing that vision.

"This is a 10 billion bet (for IBM)," Palmisano said. "No doubt about it, it's a bold bet. Is it a risky bet? I don't think so. I don't think it's a risky bet, because it's tied to our customers priorities, not to our own."

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